Technicals are teetering…

From a technical perspective, the key indexes are seemingly breaking down. The Dow, S&P 500, Nasdaq and the Russell 2000 all have something to say. Let’s start with the Dow (chart). Although this index remains above its 50-day moving average, the RSI has broken through its 50 value level. The S&P 500 (chart) is hovering right around its 50-day and has also broken through the 50 value level on the RSI. The Nasdaq (chart) did break through its 50-day but managed to close above it today with a current value of around 44 on the RSI. Finally the Russell 2000 (chart), this index has actually broken down through its 50-day with an RSI value of around 42.

Why is the 50 day moving average technically important? Institutional investors and certain market technicians use moving averages as a metric for support or resistance. The same is true for the 50 value level or the mid-point of the RSI. Certain market technicians use this technical indicator as an overbought or oversold condition. Most agree that the 70 value level of the RSI is an overbought zone and that the 30 value level is an oversold zone. The reason the 50 value level or the mid-point stands out in the RSI is that certain market technicians use that value mark as a trigger point to go long or short an underlying index or equity. Technicals are not everything to everyone, however, they can be of assistance when navigating the market waters.

All the best.